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A Lion In The Street
How J. P. Morgan, like a “one-man Federal Reserve,” calmed the bankers and helped ease the Panic of 1907
June 1957 | Volume 8, Issue 4
But when things looked blackest there was a turn for the better. Gary phoned from Washington that Roosevelt had approved the T. C. & I. merger; this news was allowed to leak and the market rallied. Representatives of Morgan and the leading bankers persuaded the State Superintendent of Banks to permit the Lincoln Trust to continue its slow payment policy, and the directors voted to open up after all. However, final consummation of the steel merger depended upon a permanent solution of the trust company problem, and this had not yet been worked out.
In desperation Morgan appealed to John D. Rockefeller, the titan of the oil industry. George Perkins had come to Morgan with a bold plan. Suppose a fund of $40,000,000 could be pledged to support the two companies. This sum represented all their remaining deposits. Surely the runs would end when depositors learned that they could definitely get their money. If Rockefeller would pledge half of this sum, Morgan and the bankers would somehow find the rest.
The negotiations were conducted by Perkins. He called on John D. Rockefeller, Jr., and explained to him the status of the trust companies: how they had assets which in time could be liquidated and how, therefore, there would be little risk in the loan. “I told him that I believed his father had a very great opportunity to be of immense service to the business of the country and to win fame for himself in a most worthy cause,” Perkins recalled in describing the interview. “I explained … that … his father would be in the attitude of having protected over fifteen thousand depositors, which step, I felt sure, would bring him the commendation and good will of hundreds of thousands of people all over the United States. I pointed out to him how the President at Washington had commended Mr. Morgan … and others for what they had done, and how I believed such action on Mr. Rockefeller’s part would unquestionably make a favorable impression on the President and other governmental officials at Washington.” Perkins’s last point was, no doubt, particularly weighty with the Rockefellers because an antitrust suit against Standard Oil was then in the courts, on appeal from Judge Landis’ astronomical $29,000,000 fine, levied in August, 1907. The younger Rockefeller promised to take the matter up with his father, but after much debate their decision was negative. This effort, too, thus ended in nothing.
Tuesday, fortunately, was election day and a bank holiday, which gave the bankers a respite. During the day, Morgan, Stillman, and Perkins worked out a new scheme. With the help of the committee of trust company presidents they would undertake to raise $20,000,000 for the Trust Company of America and the Lincoln Trust. In turn, these companies would place 66 per cent of their stock in a voting trust consisting of the heads of some of the other companies to be named by Morgan. The leverage that would force all the trust companies to agree to these terms would be the T. C. & I. deal. Unless they agreed, the finance committee of U.S. Steel would not approve the merger and in the resulting chaos no trust company would be safe.
The grand climax came on Tuesday night in the Morgan Library. In one room were the executives of the Trust Company of America, in another the executives of the Lincoln Trust Company. A third held the presidents of all the major trust companies, and a fourth the finance committee of U.S. Steel. Morgan men circulated from room to room, pressing for agreement. On into the night the negotiators debated, while outside the reporters waited impatiently for an announcement. At one point there was a great stir—a mysterious woman in black entered the Library and a rumor circulated that she was Hetty Green, the famous miser. It turned out, however, that she was only a lady who held an important mortgage on the chief office of the Trust Company of America. Finally, at three o’clock on Wednesday morning, the news broke. U.S. Steel had absorbed the Tennessee Coal & Iron Company; the trust companies would be supplied with ample cash and would be taken over by a committee under the universally respected Edward King, president of the Union Trust Company.
When trading began on Wednesday there were sharp advances on the stock market. The bonds of U.S. Steel fell slightly in active trading as they were sold to meet Moore & Schley’s obligations. (Business-stimulating cash came out of safe deposit boxes to pay for these securities, of course.) At the trust companies, the lines of waiting depositors moved briskly for the first time in two weeks. Observing reporters estimated that customers were being serviced at the rate of one every three minutes, whereas previously as few as three a day had actually received their money. Seven million dollars in gold had just arrived from Europe, and the Lusitania was expected momentarily with ten million more. BANKERS SAVE BIG TRUST COS. BY FLOOD OF CASH, the headlines proclaimed. MORGAN CLEARS UP THE WHOLE TRUST SITUATION. A tremendous change for the better had taken place; all talk of failure and collapse ceased as if by magic. The panic was over.